For Q2FY2019, GMM Pfaudler (GMM) posted a yoy growth of 29.8%/38% in revenue/ PAT amid ~94 bps margin expansion. The company is seeing good traction from its user industries like agrochemicals and pharmaceuticals which are seeing robust capex owing to slowdown in China.
Outlook and Valuation: We have increased earnings estimates for improvement in margins and robust order book. We are expecting a CAGR of ~21%/28% in revenue/ earnings over FY18-20E. The stock has given 33% return since our initiation in April and is currently trading at 20x its FY2020 earnings which still looks attractive given its robust earnings growth trajectory. Hence, we recommend BUY with a target price of `1200 (25x FY2020E EPS).

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